4 ways the private sector can empower utility resilience amid severe climate risks

Key utility systems are increasingly vulnerable to climate change risks, as confirmed by a recent report from the World Economic Forum. With insured losses from natural disasters now regularly topping $100 billion a year and spending on climate adaptation lagging far behind investments in emissions reduction, the gap in climate resilience is growing rapidly.

Recognizing this, Brazil, in its presidency of the UN Climate Conference 2025 (COP30), has pledged to raise adaptation finance to parity with mitigation (efforts to cut emissions).

Meanwhile, the consequences of inaction are growing.

Utility disruptions are directly impacting business operations. Energy, water and other services, previously considered reliable, have now become a material risk to profitability, stability and long-term growth.

Such shocks have become systemic and are hitting bottom lines. A single extended power outage can destroy vast quantities of perishable goods for a food distributor or result in downstream supply disruptions.

Growing water scarcity also threatens vital operations for semiconductor plants and beverage producers, for example, thereby impacting production.

Such disruptions carry monumental financial risks. For example, during the 2021 Texas winter storm, extreme cold led to the failure of the state’s power grid, causing prolonged blackouts that disrupted millions of homes and businesses.

One of the state’s largest power cooperatives, Brazos Electric, was forced into bankruptcy after incurring $1.8 billion in charges for electricity purchased at emergency market rates.

This crisis illustrates how a single utility failure, driven by insufficient infrastructure resilience, can lead to catastrophic operational and financial consequences.

Public actors have already built a foundation for adaptation, making up approximately 98% of adaptation finance.

For the utilities sector, China offers a compelling example of how the synergy of governance, technological innovation and strategic investment can strengthen resilience, a model examined in our recently released white paper: Building Climate-Resilient Utilities: Lessons from China and Future Pathways.

These public-led achievements are a solid starting point but as climate hazards intensify, relying on public measures alone is neither sustainable nor scalable.

The sheer scale of investment needed to systemically upgrade public utility networks – including weather-hardening pipelines, flood-proofing treatment plants and retrofitting substations – is staggering, and adds much pressure to the fiscal capacity of even the most committed governments.

For example, World Bank analysis shows that $96-296 billion a year is needed in low- and middle-income countries to make their power assets more resilient, which is a 30% increase in capital costs.

This systemic vulnerability is creating a powerful market imperative.

Investing in resilience is expanding markets for new technologies and services, opening up innovative financing and strengthening competitiveness for companies that can deliver climate-smart infrastructure solutions.

In short, climate resilience serves as both a safeguard and a growth frontier, with investment in climate change adaptation on the rise. In 2018, the annual adaptation investment of the European Union and the United Kingdom’s private sector was €15.4 billion, increasing to €52.9 billion by 2022 – 243% growth over five years.

Blended climate finance also achieved historic growth in 2023, with total financing reaching $18.3 billion (a 120% year-on-year increase), including 200% increases in private sector investment to $6 billion.

The risks and opportunities for utilities in the changing landscape are no longer hypothetical but a present-day reality.

To navigate this landscape and secure both operational stability and competitive advantage, the private sector must move from being reactive to an investment mindset. Four core pillars can surround this transition:

The private sector can help build climate-resilient infrastructure by mobilizing capital and expertise, seizing market opportunities and delivering innovative solutions that serve public interests.

It complements the government’s regulatory role by bringing the agility, innovation and efficiency needed for rapid adaptation and long-term sustainability.

Venture and growth capital can be channelled into digital technology pivotal to climate adaptation e.g. AI-powered climate analytics, smart grids, renewable energy integration and next-generation materials engineered to withstand extreme conditions.

These technologies directly address the core barriers preventing adaptation from scaling in emerging market and developing economies. For instance, AI-driven weather forecasting, early warning systems, and satellite monitoring and retrieval help address the scarcity of high-quality weather and climate data, a key input for quantifying risks and returns.

International financial institutions are increasingly focused on mobilizing private capital for climate resilience through platforms that reduce investment risk, such as long-term lending facilities such as the Resilience and Sustainability Trust, infrastructure securitization platforms such as Bayfront and blended or parallel financing structures.

The China Construction Bank, for example, advanced green finance through credit, bonds and other climate-aligned products. In partnership with Huaneng Lancangjiang Hydropower, the bank launched a “twin bond” – issuing green and conventional bonds with identical terms – to reveal the market value of low-carbon and climate-resilient investments.

The approach directs capital to clean energy projects that strengthen grid stability and climate resilience.

Complex climate risks need measures that extend beyond individual protection to collaborative risk-sharing frameworks. This requires regular innovative financial instruments and cooperative mechanisms, including:

At the same time, dedicated platforms should link private capital with climate-resilient utility projects by clarifying opportunities, building project pipelines and standardizing resilience metrics.

Without private sector involvement, scaling the technologies and practices that can produce effective climate adaptation remains a challenge. Ultimately, achieving systemic progress in climate resilience requires synergy between government leadership and market participation.